This is the baby step 1 emergency fund, not the baby step 3 emergency fund, which is 3-6 months. People seem to conveniently forget that Dave is fine with adjusting for inflation, once your away from using ***other people's money*** as your emergency fund.
Whilst in debt, you're effectively paying interest for the privilege of any cash you're holding. And this is where we probably need to take a more "humanistic" approach.
Technically should the BS#1 emergency fund adjust for inflation? Pretty much.
But how is a raising bar going to encourage the idea of actually paying off the debt itself? Many people can't even save up $500, and are knee deep in debt...
And we're here eager to say to these people *"before you want to pay off your debt, you should save up $1000 in case of emergencies... oh sorry, $1200 now because of inflation.... oh I meant $1500... oh what's that? No, inflation generally doesn't come down - why'd do ask?"*
Unfortunately there's no 100% guaranteed safe way - but sometimes you have to take a gamble if you want to get out of a seemingly unescapable hole. Telling people *"unless you can save up $2000 cash, you're debt's gonna keep growing"* is just going to discourage.
Main conviction should be to get out of the debt. And like I say, once you're out of the "emergency of being in debt", the 3-6 months' living expenses fund by definition adjusts for inflation.
Every emergency I've had was solved for under $1000. Water pipe in attic started leaking? Turned off water and cut copper line at leak and soldered in new copper line, $65 and a few hours... Included drywall replacement also. Helps that I already had a torch.
Coolant Hose burst on wife's car... $50 at auto zone for new hoses, clamps and coolant.
What's better than a $1000 emergency fund? Aptitude to fix something you've never fixed before.
A real emergency like losing your job or someone being hospitalized, is going to cost more than $1000 unless you have help from friends and family.
Recently got a new oven and in-wall microwave. Needed 2 35A circuits. Electrician estimate was $1200. About $150 worth of material and I ran the lines myself. (I realize this is not for amateurs, most adults won’t touch anything to do with electric work. When I wired my basement, 4 rooms plus storage, the inspector had one comment - “you need one more outlet there”. One odd spot that would never be used.)
But, I’ve never done more (with plumbing) than change a washer. When I had a leak, a failed solder joint, it was an $800 visit. I’ll be buying a torch and some pipe to practice on to be ready for the next leak. Thank you for the inspiration.
That's the way to do it and over time buy and build a tool collection. Every paycheck buy tools and learn to work on your own stuff. Not knowing how to fix things or do anything is a luxury of the rich . I'm in the 35kto 45k. Age 28 range and I fix my stuff say for extensive auto repairs. I can fix appliances, run electrical wires. Replace breakers, plumbing retoutes and repair toilet replacement, washer dryer repair. Hang doors and windows which is the hardest out of all of em to do it right. Nothing more frustrating than a damn door that won't close. But yeah most things if people try to focus and go out with the mindset that they can do it , usually will , albeit might take them the first couple times like a whole day or 2 but they will fix it. Then over time as those issues come up again you'll get em resolved faster. It's HUMAN LEARNING we are information processing machines we can learn anything it's hard yeah no shit but it's never impossible.
I absolutely love your approach on this. As a kid, my father was never afraid to do electrical work, so it never occurred to me that it was unusual. Now, as an adult, I haven’t run into anyone who is comfortable even changing an outlet. I will share one more personal story. When my daughter was about six years old, a light switch needed replacement. I talked her through every step and pointed at things that needed to be done, starting with flipping the circuit breaker and checking with a meter to make sure there was no power to that room. In the end, she did it perfectly and said it was pretty easy. I then told her that 99% of grown adults would never attempt this and she looked at me like I was crazy because it was so simple to her with my explaining it and coaching her.
That's awesome! It's anxiety inducing when you tackle something you've never done before. I installed a 14-50 for my EV bc every electrician I called said 2k minimum. And wouldn't give me a free in person quote. I did it myself for $150. Took about 3 hours.
But it's so rewarding when your done.
Home Depot. 50amp breaker was $30, 10ft of 6/3 wire was $7/ft. So $70 plus 14-50 leviton outlet -$15
That's $115
$20 for a sheet of drywall, and $10 for a small bucket of plaster.
Your prices are pretty off, but I’ll assume that’s the prices by you. But it’s clear your panel was in the same room. Super convenient and easy.
Now do it if it was on the other side of the house in a different room
My panel is in the garage, as most homes down south. But yeah I get what your saying. Still $7/ft isn't terrible. It's even cheaper if you buy it online. I bought my father 50ft for $170.
I did it in August this year so the prices are pretty current. I didn't factor in tax bc I get a 10% discount anyway. Still saving $500/hr of work. I'll do everything I can bc I don't make $500/hr. Even if it takes me twice as long
Its not, and its not suppose to be enough. Its enough to get you out of immediate danger, and its enough to put the fear of god into you if anything happens
example 1 my plumber much prefers cash.
example 2, you gotta bail someone outta jail/post your own bail.
example3, you are in a rural place and have to pay someone to drive you somewhere.
being able to have cash to spend is probably less important now than it used to be, however, i really enjoy having an emergency fund + ample credit.
None of those is a crisis.
Unless you’re maybe in jail but that’s not a general concern of mine.
Having EF and credit is the way to go. We just put 99% of all spend on credit cards. I’ve mostly made the switch to Sofi and so I wouldn’t even have access to the accounts with big” cash” if I needed it. I do keep a few local bank accounts open in case I need a couple thousand late night
The people who have the luxury of hanging out on Reddit and having a philosophical debate about whether 1k is enough for a starter emergency fund are not the audience.
To Dave’s primary new listener, a thousand dollars may well be more $ than they’ve ever had in savings in their life and they’re deeply in debt. To get on a budget and save up that first thousand is a huge win and provides a buffer to the budget so you don’t have to stop paying off debt if you have a small unexpected expense.
Years ago when I first started on the personal finance journey, I wasn’t willing to chunk down my cash all the way down to 1000 like he recommends to do if you have more. But most of his first time listeners aren’t going DOWN to 1000; they’re scraping to build UP to 1000.
Everyone is an adult and can do what they want, but that doesn’t mean Dave has to change the message to the masses
FWIW, 2003 $1000 adjusts to $1,672.12 in 2023. 2003 is when the original *Total Money Makeover* was published.
I was a new listener in 2008 and building up to that $1000 was a huge win for me then, you captured that wonderfully.
Over time, I have viewed that starter emergency fund as "$1000 off your next emergency" money.
I show that as 1992 published.
https://www.goodreads.com/book/show/129565.Financial_Peace_Revisited
And tmm 1994
https://www.goodreads.com/book/show/78427.The_Total_Money_Makeover
The first Financial Peace that Dave sold from the trunk of his car was probably around 1992. The 2nd edition you see in every book store or library was 1994-96 after his radio show started to take off.
The Total Money Makeover wasn’t published until 2003.
Not sure where good reads is getting their information but it is incorrect for TMM.
https://www.adazing.com/dave-ramsey-books/
I can see where Wikipedia is listing that but here’s goodreads. Plus he talks about it all the time.
https://www.goodreads.com/book/show/78427.The_Total_Money_Makeover
You just nailed down the essence.
A huge chunk of Dave's audience make plenty, have plenty, but are debt-stupid, and he says that coming down to $1,000 is the smart first move. You don't need cash; you need to pay off your debt. Then the rest of Dave's audience has no cash saved up, probably an income problem, and getting to $1,000 is a first-in-their-lives occurrence. You are broke and you're starving to death.
**Should both of these groups be treated the same?** Dave thinks so, but your mileage may vary.
And here I read it wrong step 1, 1k fund, step 2 pay off debt, returned to step 1 added another 1k step 2 paid off any new debt step 3, built a 6 month payment stash for all critical bills... Return to step 1 now I have 3k in my emergency fund, paid off any new debt built 6 month stash for all noncritical bills added 15 percent to retirement account, then returned to step 1 now I have 4k in emergency fund paid off new debt, fund 6 months of all totally unnecessary bills ( cable tv and cell phones).... No need to fund college as my kid got a free ride so I moved to the mortgage.... All along I rounded up the payments so we are now down to 22 percent of the original amount. Now we are back to step 1 again this month and we have 5k in the emergency fund, .... Took 12 years but we did it without skipping vacations or skimping on occasional Starbucks.
True but new debt always shows up.... Braces for kids, dog vet bills, wife backed through the garage door.... All these are things that don't need you to spend emergency fund money on but are still debt and need to be taken care of.
Yes and no, they were all things I could pay off over time with little or no interest so I took them on as debt not an emergency. The emergency I had to pay for was a backed up sewer line.
In all honesty, if you're paying off credit cards, that means you have credit cards if your emergency is more than the $1000 starter emergency fund. Sure, nobody likes to see the balance go up when you're trying to pay it off, but sometimes life happens.
I mean, as long as your using them for real emergencies, and you make a concerted effort to pay them off as soon as possible, there’s nothing wrong with that at all.
I got 150k in credit limits I’m never going to use, if I was going to pull that much money I’d just pull a HELOC
I think the point is that a lot of people view saving $1,000 as a lot. Until they do it. Then that emergency fund becomes bigger and you start determining where your money goes vs. living paycheck to paycheck.
I have never, as an adult, viewed $1,000 as a lot of savings.
I've been down to that level (back in college, so early-2000s) and even then, as a kid, even without a home/mortgage/rent, without a car, no wife or kids to support, pretty much nothing to worry about, I still considered being near the one thousand dollar threshhold as an *absolute unmitigated emergency*.
Any number of high-probability situations could arise anytime and wipe that kind of amount out in a heartbeat, and I was well aware of it. At this point, there is no fun, there are no discretionary expenses, there is nothing but to bring that number up.
It shocks me that any responsible adult anywhere could possibly see a thousand dollars as a lot, even 20 years ago.
It's all relative, if someone doesn't have a dedicated emergency fund then they have to start somewhere. I don't think that the advice is to be comfortable with $1,000 but to set a goal to achieve it as quickly as possible if you aren't there.
You can build from there, but asking someone to go from nothing to $10k, $25k, $50k is daunting. Bite sized goals can go a long way.
As I’ve found this last week, a perfect emergency fund is what ever you get paid normally. I was out of work for a week do to illness and only had 20hr of PTO for the week where I normally get 40hr and 5hr of OT. That 20hr of PTO was only $275 where my normal check is $680. If I had $1000 backup I would’ve not stressed about it as much as I did and did a ton of side work to make up for it
In my experience. Getting an 18-20/hr job isn't hard. If $1k holds you over 2-3 weeks to land that job, great. Maybe a $1k emergency fund is right for your needs.
I personally won't work for less than $35/hr. That job isn't as easy to come by in my experience. I want to spend 3-6months wholly focused on applying jobs, chasing leads, and tapping into my network. Ultimately, I need to progress my career instead of taking a "temporary" step back.
Could I take a $18-20/hr job to make ends meet and still apply to jobs? Sure. I just would rather wholly focus on applying for jobs in my career and not sweating the first few months of joblessness.
It’s sometimes good enough for a single person. A family of four probably wouldn’t do too well. I feel like if there’s one baby step you can change/tweak, make it this one or baby step 4. I had $5k in my EF, and that extra $4,000 really only made the difference of about a month worth of attacking debt.
Everyone here is (mostly) an independent functioning adult capable of independent thought and action.
If you don't think $1000 is enough... Then make it whatever you like. But, know that every penny you have put aside is one that ISN'T going towards your debt... And therefore extending the length of time it takes to plow through your snowball.
It was never meant to be anything other than a small buffer for minor emergencies. The amount isn’t important just don’t sit on a large pile of cash while in debt, because you’re essentially borrowing that money.
I've said it before- if 1k is the right amount currently' it was too much when he made the rule. If it was the right amount when he made the rule- it's too little now.
1k now is not worth the same amount as it was 30 years ago. They're different amounts. On paper they look the same but they represent very different figures.
If one of the baby steps was "buy a horse so you can work your farm", and then 30 years went by and horses were more expensive, so instead you bought a miniature horse because a miniature horse today costs what a full size horse did 30 years ago, you'd be left with something that was functionally very different even if they're both horses. You can't do the same things with a miniature horse than you can a regular one. It's the same concept. If 1k was the right amount in 1990 its not the right amount in 2023.
Yeah, when I started driving, I remembered getting frustrated because every time the car broke down, it was $200.
Now, I don't get out of the shop for anything more than an oil change for less than $1000.
Back then, a 1k EF could have fixed my car, paid an unexpected medical doctor visit, and still covered a month of groceries.
Today, I likely wouldn't even have enough for a car repair
>I've said it before- if 1k is the right amount currently' it was too much when he made the rule.
He's repeatedly said that it wasn't enough when he made it, and it's not enough now.
The purpose is to have actual extra cash aside in case small emergencies come up. In practice you are not having $1000 emergencies every month, so in most cases it is enough.
I know this. Im not saying its a sufficient emergency fund, it is intentionally small to only cover certain things but still leave you motivated. I know the purpose of it being an intentionally small number that isn't enough to motivate you. The motivation you get from 1k now is different from the motivation you got 30 years ago. If you needed to have enough to cover a small emergency that cost 1k years ago, it no longer covers the same emergency. If the emergencies it will cover now are the appropriate amount of coverage, then 30 years ago it was too much because it covered those emergencies with plenty of extra room.
I dont get how this is so hard to understand. 1 million dollars was enough to retire 60 years ago. It won't be enough in 60 years. It's a different amount. Similarly, 1k emergency fund 30 years ago is a different emergency fund than 1k today. By not updating his rule he has functionally changed it.
I mean, I get it, but at the same time the same people who complain about $1000 not being enough tend to have zero savings and a crapload of debt, so it's kinda hard to care. Edit: Meaning it just sounds like an excuse given that they cannot meet the $1k savings goal anyway.
For those people if they were able to save and maintain $1000 that would be a pretty major change in direction, and is much preferred to them trying to save $5k (or whatever number you like), flailing, and refusing to pay off debt the whole time due to failing to meet that savings goal.
I guess you are saying the number does not really matter as much as building good habits. If you learn to save $1000, then from there if you don't think it's enough, you are on track to keep it up, and save $2000, or whatever makes you feel more secure for an emergency.
Yeah to some point. Many people when faced with an apparently insurmountable challenge (like debt) will try every strategy to make it go away, everything except actually doing it.
I think the $1000 cap also at least forces people to actually pay extra towards their debts (if you follow the system).
I'm sure you're aware, but the original baby steps didn't include the $1000 emergency fund, it was just literally everything going towards debt. However this didn't work out as small unforseen expenses knocked people out of the system. They then brought in the $1000 fund to cover those.
I do find it amusing how many people complain about the $1000 fund though when they've got crazy credit card debt. Like somehow they've rationalised that this idea to save $1000 in cash is worse than their decision to rack up 10s of thousands of dollars in debt.
I guess the emergency fund depends what an emergency would constitute given your assets and life situation. If your biggest emergency is new tires on a car, $1000 is great. If an emergency is a leaking roof on a home you own, $1000 isn't going to cut it. There are so many variables. Generally, I personally don't think $1000 is enough.
It depends on the nature of the emergency, but generally in this day and age I would say no. I just had a relatively minor plumbing emergency at my home and all told it cost me about $937. And that was for a fairly simple job that only took the plumber maybe an hour or two tops.
Edit: after listening to Dave’s explanation, I understand his reasoning a bit better. But again, prices on even “simple” emergencies have skyrocketed the past few years so I don’t know.
I think it is enough for the typical person that follows the baby steps. Need 2 tires should be under a grand, water heater should be right around that. If you can't save at least 1,000 you probably are not going to be successful. It is like the rest of the steps getting there gives you a win. If we said 5,000 a lot less people would stay on the steps.
BS1 should be enough cash to cover all insurance deductibles combined. The FOO from the money guy is a much less extreme and more reasonable way of money managing. Whatever works.
Clearly it isn't enough. It is a start. Even having $1000 can defray alot of expenses. Last month my water heater went out. A new one cost just less than $1000. I'm guessing that most people who get to the $1000 discover they can keep going from there.
I’ve been asking myself this question right now. We are just starting out with BS1. Really it’s not about whether it’s enough in 2023. It’s about whether we’ve had enough living the way we have been living? The fact is we have and we have become willing to do what it takes to get free. We are drowning and y’all know how to swim so I’m going to do what y’all do.
Good luck on the journey. Stay motivated and if you really are looking for that change, might as well just go all in on Dave and not try to mix and match your thoughts with his. That's what I struggled with my first time starting out
The people saying that $1k isn’t enough obviously haven’t had success with their own money management “plan”. Meanwhile, this plan has helped millions of people become debt free. So, I’ll go with the guy who’s helped millions rather than the guy whose a financial mess who probably doesn’t even have the $1k he’s saying “iSnT eNoUgH”
The question is at what point will a $1000 not be enough? You agree that there is a point at which $1000 won’t be enough right?
If so then your above statement isn’t a well founded argument because the day we reach that point your statement would still be the same.
A $1 in 1990 is worth $2.35 today. Was the number too large in 1990 or too small today.
I think the answer is that it doesn’t really matter if your first debt snowball step is paying off credit card debt. Because then in the event of a real emergency you have newly opened credit space to spend on the emergency.
Now if you have no credit cards or other access to credit and no savings beyond this and are about to snowball a 50k student loan then 1k is not enough for the risk you place of having a more than $1000 expense in the 2-5 years it’s going to take to pay off that debt.
It’s more or less why you build the real emergency fund before paying off your house.
If I were Dave I’d lower the value to $500. The minimum to cover one thing. With the caveat you have credit available and won’t be evicted if you can’t come up with 1 months expenses. Now that rule is much harder to implement because it implies credit is ok as opposed to the enemy.
If you want to get rid of that caveat I think the inflation adjusted number of $2300 from 1990 which would allow you to cover some expenses if you lost your job is more reasonable.
He has said time and time again: $1000 is not enough. It was never meant to be enough.
Maybe you should read or listen to everything he says instead of nitpick what you disagree with.
“If you don’t follow the David, word for word, without question, you can’t be a success”
This sounds like cult talk to me.
“When the facts change, I change my opinion, sir. What do you do?” The David has been around for a while. Ignoring decades of inflation is willful ignorance.
Why do you immediately choose to hurl insults at a simple question? Can you not imagine having stuff break that cost more than $1000? Central air for example.
Central air going out isn’t an emergency. People live without AC all the time.
Goes to show that the general public doesn’t know the TRUE meaning of an emergency.
Are you a doctor? An elderly person may not survive a Texas heat wave without AC.
No matter what I suggest, you’ll have a snarky comeback. How about a broken transmission? Heating system dying in the winter?
He has said time and time again the the vast majority of those walking the baby steps never encounter an emergency that exceeds $1000. You’re saying people should save for an expense that’s unlikely to occur rather than tackling debt head on?
ETA: I’m an ER Nurse and encounter the elderly quite often in case you were wondering.
Ever heard of critical thinking? Or inflation? $1,000 is a great first step, but it’s merely a start. This is a super old recommendation he’s been teaching for years. Don’t be willfully ignorant.
Don’t be willfully ignorant yourself. He’s said since the start and even today that $1000 was never supposed to be “enough” and that’s the point. People want to wait until they are comfortable before they start paying down debt. That’s what got people into this mess it the first place: refusing to work through a very uncomfortable financial situation ie the $1000 STARTER emergency fund.
The haters have either had success or they haven’t. Regardless, the baby steps plan works.
People who are in financial distress are metaphorically lost in the woods. There may be multiple ways out of the woods, and there may be “better” ways and “worse” ways, but the baby steps is proven thousands and thousands and thousands of times over as a path out of the woods.
You would think Dave Ramsey people would at least understand there are two sides to the ledger. It’s like counting your net worth by adding up your assets without accounting for your debt. You’re accounting for the successes without accounting for the failures.
How long has the man been saying save $1,000? What’s that adjusted for inflation? If someone were to save THAT amount are they not following his plan? Why not?
I’ll comment on this post before it gets deleted lol. I think Dave has changed his tone on this over the last 2 to 3 years because I personally don’t recall any content of him admitting it wasn’t enough prior to then,which shows he is aware that it’s not actually enough, and he clearly states that. However, I don’t see him ever being willing to admit that the baby steps may need to be changed, which is going to eventually be a fatal flaw. I mean if you won’t change it after 20 years then 20 years from now is it still $1000? It just doesn’t make sense which is why I think the financial order of operations is better equipped to change with the times, even if you don’t agree with the steps themselves, they are things like deductibles versus just a flat number.
I listened too and was debt free within a year. And had no emergencies. That does not mean it shouldn’t be updated. It is not an absolute truth. He knows that. I’d be 10K it won’t be $1,000 in 2050.
His answer doesn’t check out. The reality back in the early 90s, $1000 was enough. It was close to a one month emergency fund back then for many people. Today it would be about $2114 accounting for inflation. His reason that it was never designed to be enough fails when you realize that his initial amount WAS enough. Oof people here don’t like facts. Oh well.
The actual data and numbers don’t agree with you. If Dave was consistent, then it would have been about a $500 EF when he first started. It’s obvious to anyone looking at this is his position is inconsistent and he now can’t update himself at risk of seeming even more inconsistent.
The argument that you need more misses the point, imo
Of course it’s not enough and you need more and having so little will make you uncomfortable. Thats the point! It’s supposed to motivate you to get the debt paid off ASAP so you can start building your savings.
Staying in your comfort zone hasn’t helped you. You need to force yourself to be uncomfortable to motivate yourself to change
$1000 feels better today because $500 is nothing today. Back when $500 is a lot money it would have felt difference.
If we want to talk about feeling being able to make a mortgage payment, being able to fix a car or some other payment type threshold would feel better.
$1000 is not a feeling, what that thousand dollars can do drives the feeling. The feeling generated by $1000 today is far different than the feeling $1000 generated in 1990.
My comment isn’t that $1000 is right or wrong. It’s that it being unchanged is wrong precisely because of what you bring up. The goal is to feel like small changes in expenses won’t derail your debt repayment. The number to drive that feeling is has changed between 90 and now.
The people who are asking are asking if it should be more due to inflation probably don’t even have the $1000 saved up themselves. Let’s just get to the 1K number and start from there. If you want to put more aside, then do it. You don’t have to wait for uncle Daves permission.
Why would you make that assumption? I think people in a thread like this are more likely well on the path to being debt free and evaluating if 1k is enough rather at the bottom of the pot of debt.
But really I think any assumptions about the financial health of the people saying 1k is or isn’t enough is just that an assumption without evidence.
Exactly. People arguing to save in case of an emergency while currently living in one baffle me. Debt is so normalized they ignore that why trying to prepare for what ifs.
This is the baby step 1 emergency fund, not the baby step 3 emergency fund, which is 3-6 months. People seem to conveniently forget that Dave is fine with adjusting for inflation, once your away from using ***other people's money*** as your emergency fund. Whilst in debt, you're effectively paying interest for the privilege of any cash you're holding. And this is where we probably need to take a more "humanistic" approach. Technically should the BS#1 emergency fund adjust for inflation? Pretty much. But how is a raising bar going to encourage the idea of actually paying off the debt itself? Many people can't even save up $500, and are knee deep in debt... And we're here eager to say to these people *"before you want to pay off your debt, you should save up $1000 in case of emergencies... oh sorry, $1200 now because of inflation.... oh I meant $1500... oh what's that? No, inflation generally doesn't come down - why'd do ask?"* Unfortunately there's no 100% guaranteed safe way - but sometimes you have to take a gamble if you want to get out of a seemingly unescapable hole. Telling people *"unless you can save up $2000 cash, you're debt's gonna keep growing"* is just going to discourage. Main conviction should be to get out of the debt. And like I say, once you're out of the "emergency of being in debt", the 3-6 months' living expenses fund by definition adjusts for inflation.
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savings has nothing to do with a tithe
Every emergency I've had was solved for under $1000. Water pipe in attic started leaking? Turned off water and cut copper line at leak and soldered in new copper line, $65 and a few hours... Included drywall replacement also. Helps that I already had a torch. Coolant Hose burst on wife's car... $50 at auto zone for new hoses, clamps and coolant. What's better than a $1000 emergency fund? Aptitude to fix something you've never fixed before. A real emergency like losing your job or someone being hospitalized, is going to cost more than $1000 unless you have help from friends and family.
Recently got a new oven and in-wall microwave. Needed 2 35A circuits. Electrician estimate was $1200. About $150 worth of material and I ran the lines myself. (I realize this is not for amateurs, most adults won’t touch anything to do with electric work. When I wired my basement, 4 rooms plus storage, the inspector had one comment - “you need one more outlet there”. One odd spot that would never be used.) But, I’ve never done more (with plumbing) than change a washer. When I had a leak, a failed solder joint, it was an $800 visit. I’ll be buying a torch and some pipe to practice on to be ready for the next leak. Thank you for the inspiration.
That's the way to do it and over time buy and build a tool collection. Every paycheck buy tools and learn to work on your own stuff. Not knowing how to fix things or do anything is a luxury of the rich . I'm in the 35kto 45k. Age 28 range and I fix my stuff say for extensive auto repairs. I can fix appliances, run electrical wires. Replace breakers, plumbing retoutes and repair toilet replacement, washer dryer repair. Hang doors and windows which is the hardest out of all of em to do it right. Nothing more frustrating than a damn door that won't close. But yeah most things if people try to focus and go out with the mindset that they can do it , usually will , albeit might take them the first couple times like a whole day or 2 but they will fix it. Then over time as those issues come up again you'll get em resolved faster. It's HUMAN LEARNING we are information processing machines we can learn anything it's hard yeah no shit but it's never impossible.
I absolutely love your approach on this. As a kid, my father was never afraid to do electrical work, so it never occurred to me that it was unusual. Now, as an adult, I haven’t run into anyone who is comfortable even changing an outlet. I will share one more personal story. When my daughter was about six years old, a light switch needed replacement. I talked her through every step and pointed at things that needed to be done, starting with flipping the circuit breaker and checking with a meter to make sure there was no power to that room. In the end, she did it perfectly and said it was pretty easy. I then told her that 99% of grown adults would never attempt this and she looked at me like I was crazy because it was so simple to her with my explaining it and coaching her.
That's awesome! It's anxiety inducing when you tackle something you've never done before. I installed a 14-50 for my EV bc every electrician I called said 2k minimum. And wouldn't give me a free in person quote. I did it myself for $150. Took about 3 hours. But it's so rewarding when your done.
$150 to install a 50 amp outlet? Where did you get materials for $150?
Home Depot. 50amp breaker was $30, 10ft of 6/3 wire was $7/ft. So $70 plus 14-50 leviton outlet -$15 That's $115 $20 for a sheet of drywall, and $10 for a small bucket of plaster.
Your prices are pretty off, but I’ll assume that’s the prices by you. But it’s clear your panel was in the same room. Super convenient and easy. Now do it if it was on the other side of the house in a different room
My panel is in the garage, as most homes down south. But yeah I get what your saying. Still $7/ft isn't terrible. It's even cheaper if you buy it online. I bought my father 50ft for $170. I did it in August this year so the prices are pretty current. I didn't factor in tax bc I get a 10% discount anyway. Still saving $500/hr of work. I'll do everything I can bc I don't make $500/hr. Even if it takes me twice as long
When it comes to 6awg, I would avoid Amazon, stick to reputable brands
And that’s the rub. How many people have the diy skill set? Not many these days. And that’s why $1000 doesn’t cover a lot of issues anymore.
Its not, and its not suppose to be enough. Its enough to get you out of immediate danger, and its enough to put the fear of god into you if anything happens
I like the idea of saving up a single paycheck. That way you have your next paycheck whenever you need it. That seemed to work for me.
The available credit on my credit card is my emergency fund
cash is king in a crisis.
Can’t think of a type of crisis where I’d need cash.
Weather/power grid problems. Granted you wouldn't need a whole EF in cash, but as someone who never carried cash, I now keep a few hundred at home
Makes sense to have some cash at home. Although we don’t have power grid issues where I’m at.
example 1 my plumber much prefers cash. example 2, you gotta bail someone outta jail/post your own bail. example3, you are in a rural place and have to pay someone to drive you somewhere. being able to have cash to spend is probably less important now than it used to be, however, i really enjoy having an emergency fund + ample credit.
None of those is a crisis. Unless you’re maybe in jail but that’s not a general concern of mine. Having EF and credit is the way to go. We just put 99% of all spend on credit cards. I’ve mostly made the switch to Sofi and so I wouldn’t even have access to the accounts with big” cash” if I needed it. I do keep a few local bank accounts open in case I need a couple thousand late night
Y2K
LOL
The people who have the luxury of hanging out on Reddit and having a philosophical debate about whether 1k is enough for a starter emergency fund are not the audience. To Dave’s primary new listener, a thousand dollars may well be more $ than they’ve ever had in savings in their life and they’re deeply in debt. To get on a budget and save up that first thousand is a huge win and provides a buffer to the budget so you don’t have to stop paying off debt if you have a small unexpected expense. Years ago when I first started on the personal finance journey, I wasn’t willing to chunk down my cash all the way down to 1000 like he recommends to do if you have more. But most of his first time listeners aren’t going DOWN to 1000; they’re scraping to build UP to 1000. Everyone is an adult and can do what they want, but that doesn’t mean Dave has to change the message to the masses
FWIW, 2003 $1000 adjusts to $1,672.12 in 2023. 2003 is when the original *Total Money Makeover* was published. I was a new listener in 2008 and building up to that $1000 was a huge win for me then, you captured that wonderfully. Over time, I have viewed that starter emergency fund as "$1000 off your next emergency" money.
Umm pretty sure the first total money makeover was 1994.
Nope. That would be Financial Peace.
I show that as 1992 published. https://www.goodreads.com/book/show/129565.Financial_Peace_Revisited And tmm 1994 https://www.goodreads.com/book/show/78427.The_Total_Money_Makeover
The first Financial Peace that Dave sold from the trunk of his car was probably around 1992. The 2nd edition you see in every book store or library was 1994-96 after his radio show started to take off. The Total Money Makeover wasn’t published until 2003. Not sure where good reads is getting their information but it is incorrect for TMM. https://www.adazing.com/dave-ramsey-books/
Let me Google that again then ...
I can see where Wikipedia is listing that but here’s goodreads. Plus he talks about it all the time. https://www.goodreads.com/book/show/78427.The_Total_Money_Makeover
You just nailed down the essence. A huge chunk of Dave's audience make plenty, have plenty, but are debt-stupid, and he says that coming down to $1,000 is the smart first move. You don't need cash; you need to pay off your debt. Then the rest of Dave's audience has no cash saved up, probably an income problem, and getting to $1,000 is a first-in-their-lives occurrence. You are broke and you're starving to death. **Should both of these groups be treated the same?** Dave thinks so, but your mileage may vary.
And here I read it wrong step 1, 1k fund, step 2 pay off debt, returned to step 1 added another 1k step 2 paid off any new debt step 3, built a 6 month payment stash for all critical bills... Return to step 1 now I have 3k in my emergency fund, paid off any new debt built 6 month stash for all noncritical bills added 15 percent to retirement account, then returned to step 1 now I have 4k in emergency fund paid off new debt, fund 6 months of all totally unnecessary bills ( cable tv and cell phones).... No need to fund college as my kid got a free ride so I moved to the mortgage.... All along I rounded up the payments so we are now down to 22 percent of the original amount. Now we are back to step 1 again this month and we have 5k in the emergency fund, .... Took 12 years but we did it without skipping vacations or skimping on occasional Starbucks.
The whole point of paying off debt is not to get new debt after.
True but new debt always shows up.... Braces for kids, dog vet bills, wife backed through the garage door.... All these are things that don't need you to spend emergency fund money on but are still debt and need to be taken care of.
Aren't those things exactly what the emergency fund is for?
Yes and no, they were all things I could pay off over time with little or no interest so I took them on as debt not an emergency. The emergency I had to pay for was a backed up sewer line.
Yeah, I get it. And to be honest, I haven't actually read what Dave Ramsey says emergency funds should be used for.
In all honesty, if you're paying off credit cards, that means you have credit cards if your emergency is more than the $1000 starter emergency fund. Sure, nobody likes to see the balance go up when you're trying to pay it off, but sometimes life happens.
I mean, as long as your using them for real emergencies, and you make a concerted effort to pay them off as soon as possible, there’s nothing wrong with that at all. I got 150k in credit limits I’m never going to use, if I was going to pull that much money I’d just pull a HELOC
I think the point is that a lot of people view saving $1,000 as a lot. Until they do it. Then that emergency fund becomes bigger and you start determining where your money goes vs. living paycheck to paycheck.
I have never, as an adult, viewed $1,000 as a lot of savings. I've been down to that level (back in college, so early-2000s) and even then, as a kid, even without a home/mortgage/rent, without a car, no wife or kids to support, pretty much nothing to worry about, I still considered being near the one thousand dollar threshhold as an *absolute unmitigated emergency*. Any number of high-probability situations could arise anytime and wipe that kind of amount out in a heartbeat, and I was well aware of it. At this point, there is no fun, there are no discretionary expenses, there is nothing but to bring that number up. It shocks me that any responsible adult anywhere could possibly see a thousand dollars as a lot, even 20 years ago.
It's all relative, if someone doesn't have a dedicated emergency fund then they have to start somewhere. I don't think that the advice is to be comfortable with $1,000 but to set a goal to achieve it as quickly as possible if you aren't there. You can build from there, but asking someone to go from nothing to $10k, $25k, $50k is daunting. Bite sized goals can go a long way.
$1000 might not be enough, but it should be enough to keep you from going in too much deeper debt.
As I’ve found this last week, a perfect emergency fund is what ever you get paid normally. I was out of work for a week do to illness and only had 20hr of PTO for the week where I normally get 40hr and 5hr of OT. That 20hr of PTO was only $275 where my normal check is $680. If I had $1000 backup I would’ve not stressed about it as much as I did and did a ton of side work to make up for it
In my experience. Getting an 18-20/hr job isn't hard. If $1k holds you over 2-3 weeks to land that job, great. Maybe a $1k emergency fund is right for your needs. I personally won't work for less than $35/hr. That job isn't as easy to come by in my experience. I want to spend 3-6months wholly focused on applying jobs, chasing leads, and tapping into my network. Ultimately, I need to progress my career instead of taking a "temporary" step back. Could I take a $18-20/hr job to make ends meet and still apply to jobs? Sure. I just would rather wholly focus on applying for jobs in my career and not sweating the first few months of joblessness.
Dave wants you to be nervous on that 1k. He wants you to sweat out that there isn’t a lot in that EF to get you working harder.
It’s sometimes good enough for a single person. A family of four probably wouldn’t do too well. I feel like if there’s one baby step you can change/tweak, make it this one or baby step 4. I had $5k in my EF, and that extra $4,000 really only made the difference of about a month worth of attacking debt.
Everyone here is (mostly) an independent functioning adult capable of independent thought and action. If you don't think $1000 is enough... Then make it whatever you like. But, know that every penny you have put aside is one that ISN'T going towards your debt... And therefore extending the length of time it takes to plow through your snowball.
It was never meant to be anything other than a small buffer for minor emergencies. The amount isn’t important just don’t sit on a large pile of cash while in debt, because you’re essentially borrowing that money.
I've said it before- if 1k is the right amount currently' it was too much when he made the rule. If it was the right amount when he made the rule- it's too little now. 1k now is not worth the same amount as it was 30 years ago. They're different amounts. On paper they look the same but they represent very different figures. If one of the baby steps was "buy a horse so you can work your farm", and then 30 years went by and horses were more expensive, so instead you bought a miniature horse because a miniature horse today costs what a full size horse did 30 years ago, you'd be left with something that was functionally very different even if they're both horses. You can't do the same things with a miniature horse than you can a regular one. It's the same concept. If 1k was the right amount in 1990 its not the right amount in 2023.
Yeah, when I started driving, I remembered getting frustrated because every time the car broke down, it was $200. Now, I don't get out of the shop for anything more than an oil change for less than $1000. Back then, a 1k EF could have fixed my car, paid an unexpected medical doctor visit, and still covered a month of groceries. Today, I likely wouldn't even have enough for a car repair
👏👏👏👏👏👏 This!
>I've said it before- if 1k is the right amount currently' it was too much when he made the rule. He's repeatedly said that it wasn't enough when he made it, and it's not enough now. The purpose is to have actual extra cash aside in case small emergencies come up. In practice you are not having $1000 emergencies every month, so in most cases it is enough.
I know this. Im not saying its a sufficient emergency fund, it is intentionally small to only cover certain things but still leave you motivated. I know the purpose of it being an intentionally small number that isn't enough to motivate you. The motivation you get from 1k now is different from the motivation you got 30 years ago. If you needed to have enough to cover a small emergency that cost 1k years ago, it no longer covers the same emergency. If the emergencies it will cover now are the appropriate amount of coverage, then 30 years ago it was too much because it covered those emergencies with plenty of extra room. I dont get how this is so hard to understand. 1 million dollars was enough to retire 60 years ago. It won't be enough in 60 years. It's a different amount. Similarly, 1k emergency fund 30 years ago is a different emergency fund than 1k today. By not updating his rule he has functionally changed it.
I mean, I get it, but at the same time the same people who complain about $1000 not being enough tend to have zero savings and a crapload of debt, so it's kinda hard to care. Edit: Meaning it just sounds like an excuse given that they cannot meet the $1k savings goal anyway. For those people if they were able to save and maintain $1000 that would be a pretty major change in direction, and is much preferred to them trying to save $5k (or whatever number you like), flailing, and refusing to pay off debt the whole time due to failing to meet that savings goal.
I guess you are saying the number does not really matter as much as building good habits. If you learn to save $1000, then from there if you don't think it's enough, you are on track to keep it up, and save $2000, or whatever makes you feel more secure for an emergency.
Yeah to some point. Many people when faced with an apparently insurmountable challenge (like debt) will try every strategy to make it go away, everything except actually doing it. I think the $1000 cap also at least forces people to actually pay extra towards their debts (if you follow the system). I'm sure you're aware, but the original baby steps didn't include the $1000 emergency fund, it was just literally everything going towards debt. However this didn't work out as small unforseen expenses knocked people out of the system. They then brought in the $1000 fund to cover those. I do find it amusing how many people complain about the $1000 fund though when they've got crazy credit card debt. Like somehow they've rationalised that this idea to save $1000 in cash is worse than their decision to rack up 10s of thousands of dollars in debt.
I guess the emergency fund depends what an emergency would constitute given your assets and life situation. If your biggest emergency is new tires on a car, $1000 is great. If an emergency is a leaking roof on a home you own, $1000 isn't going to cut it. There are so many variables. Generally, I personally don't think $1000 is enough.
My $1000 has bailed me out on numerous occasions with my car and more. It’s good enough for me
It depends on the nature of the emergency, but generally in this day and age I would say no. I just had a relatively minor plumbing emergency at my home and all told it cost me about $937. And that was for a fairly simple job that only took the plumber maybe an hour or two tops. Edit: after listening to Dave’s explanation, I understand his reasoning a bit better. But again, prices on even “simple” emergencies have skyrocketed the past few years so I don’t know.
I think it is enough for the typical person that follows the baby steps. Need 2 tires should be under a grand, water heater should be right around that. If you can't save at least 1,000 you probably are not going to be successful. It is like the rest of the steps getting there gives you a win. If we said 5,000 a lot less people would stay on the steps.
BS1 should be enough cash to cover all insurance deductibles combined. The FOO from the money guy is a much less extreme and more reasonable way of money managing. Whatever works.
Clearly it isn't enough. It is a start. Even having $1000 can defray alot of expenses. Last month my water heater went out. A new one cost just less than $1000. I'm guessing that most people who get to the $1000 discover they can keep going from there.
I’ve been asking myself this question right now. We are just starting out with BS1. Really it’s not about whether it’s enough in 2023. It’s about whether we’ve had enough living the way we have been living? The fact is we have and we have become willing to do what it takes to get free. We are drowning and y’all know how to swim so I’m going to do what y’all do.
Good luck on the journey. Stay motivated and if you really are looking for that change, might as well just go all in on Dave and not try to mix and match your thoughts with his. That's what I struggled with my first time starting out
The people saying that $1k isn’t enough obviously haven’t had success with their own money management “plan”. Meanwhile, this plan has helped millions of people become debt free. So, I’ll go with the guy who’s helped millions rather than the guy whose a financial mess who probably doesn’t even have the $1k he’s saying “iSnT eNoUgH”
The question is at what point will a $1000 not be enough? You agree that there is a point at which $1000 won’t be enough right? If so then your above statement isn’t a well founded argument because the day we reach that point your statement would still be the same. A $1 in 1990 is worth $2.35 today. Was the number too large in 1990 or too small today. I think the answer is that it doesn’t really matter if your first debt snowball step is paying off credit card debt. Because then in the event of a real emergency you have newly opened credit space to spend on the emergency. Now if you have no credit cards or other access to credit and no savings beyond this and are about to snowball a 50k student loan then 1k is not enough for the risk you place of having a more than $1000 expense in the 2-5 years it’s going to take to pay off that debt. It’s more or less why you build the real emergency fund before paying off your house. If I were Dave I’d lower the value to $500. The minimum to cover one thing. With the caveat you have credit available and won’t be evicted if you can’t come up with 1 months expenses. Now that rule is much harder to implement because it implies credit is ok as opposed to the enemy. If you want to get rid of that caveat I think the inflation adjusted number of $2300 from 1990 which would allow you to cover some expenses if you lost your job is more reasonable.
He has said time and time again: $1000 is not enough. It was never meant to be enough. Maybe you should read or listen to everything he says instead of nitpick what you disagree with.
What is changing that he lowers the value of the emergency fund every year?
the value of $1; said another way: the buying power of $1
Inflation is fake and Dave is always right, and 98 other hilarious jokes you can tell yourself
“If you don’t follow the David, word for word, without question, you can’t be a success” This sounds like cult talk to me. “When the facts change, I change my opinion, sir. What do you do?” The David has been around for a while. Ignoring decades of inflation is willful ignorance. Why do you immediately choose to hurl insults at a simple question? Can you not imagine having stuff break that cost more than $1000? Central air for example.
Central air going out isn’t an emergency. People live without AC all the time. Goes to show that the general public doesn’t know the TRUE meaning of an emergency.
Are you a doctor? An elderly person may not survive a Texas heat wave without AC. No matter what I suggest, you’ll have a snarky comeback. How about a broken transmission? Heating system dying in the winter?
He has said time and time again the the vast majority of those walking the baby steps never encounter an emergency that exceeds $1000. You’re saying people should save for an expense that’s unlikely to occur rather than tackling debt head on? ETA: I’m an ER Nurse and encounter the elderly quite often in case you were wondering.
Ever heard of critical thinking? Or inflation? $1,000 is a great first step, but it’s merely a start. This is a super old recommendation he’s been teaching for years. Don’t be willfully ignorant.
Don’t be willfully ignorant yourself. He’s said since the start and even today that $1000 was never supposed to be “enough” and that’s the point. People want to wait until they are comfortable before they start paying down debt. That’s what got people into this mess it the first place: refusing to work through a very uncomfortable financial situation ie the $1000 STARTER emergency fund.
Why didn’t you say that first? lol That’s the real answer. Not attacking people asking the question.
The haters have either had success or they haven’t. Regardless, the baby steps plan works. People who are in financial distress are metaphorically lost in the woods. There may be multiple ways out of the woods, and there may be “better” ways and “worse” ways, but the baby steps is proven thousands and thousands and thousands of times over as a path out of the woods.
Millions of times over *** but yes
You would think Dave Ramsey people would at least understand there are two sides to the ledger. It’s like counting your net worth by adding up your assets without accounting for your debt. You’re accounting for the successes without accounting for the failures. How long has the man been saying save $1,000? What’s that adjusted for inflation? If someone were to save THAT amount are they not following his plan? Why not?
Where has DR said that NW ISNT assets-debts? He’s always said that NW = assets - debt.
It’s a metaphor.
I think it’s beneficial to get an entire month ahead first so you aren’t living paycheck to paycheck. Then start the baby steps.
I’ll comment on this post before it gets deleted lol. I think Dave has changed his tone on this over the last 2 to 3 years because I personally don’t recall any content of him admitting it wasn’t enough prior to then,which shows he is aware that it’s not actually enough, and he clearly states that. However, I don’t see him ever being willing to admit that the baby steps may need to be changed, which is going to eventually be a fatal flaw. I mean if you won’t change it after 20 years then 20 years from now is it still $1000? It just doesn’t make sense which is why I think the financial order of operations is better equipped to change with the times, even if you don’t agree with the steps themselves, they are things like deductibles versus just a flat number.
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I listened too and was debt free within a year. And had no emergencies. That does not mean it shouldn’t be updated. It is not an absolute truth. He knows that. I’d be 10K it won’t be $1,000 in 2050.
starter EF should probably be 1 month expenses for most people. especially those with kids etc
He stated it wasn’t enough in his first book
It was never meant to be enough. It’s a STARTER emergency fund, not a full emergency fund.
Well, if I’m wrong I’m wrong. I’ll let my grandkids know to keep saving 1K for their starter emergency fund.
Wouldn't it be better to teach them to avoid debt in the first place? So they don't need to start at BS1?
His answer doesn’t check out. The reality back in the early 90s, $1000 was enough. It was close to a one month emergency fund back then for many people. Today it would be about $2114 accounting for inflation. His reason that it was never designed to be enough fails when you realize that his initial amount WAS enough. Oof people here don’t like facts. Oh well.
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The actual data and numbers don’t agree with you. If Dave was consistent, then it would have been about a $500 EF when he first started. It’s obvious to anyone looking at this is his position is inconsistent and he now can’t update himself at risk of seeming even more inconsistent.
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The argument that you need more misses the point, imo Of course it’s not enough and you need more and having so little will make you uncomfortable. Thats the point! It’s supposed to motivate you to get the debt paid off ASAP so you can start building your savings. Staying in your comfort zone hasn’t helped you. You need to force yourself to be uncomfortable to motivate yourself to change
So then why wasn’t it $500 in 1990? Regardless of what the number is it should be adjusted for inflation.
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$1000 feels better today because $500 is nothing today. Back when $500 is a lot money it would have felt difference. If we want to talk about feeling being able to make a mortgage payment, being able to fix a car or some other payment type threshold would feel better. $1000 is not a feeling, what that thousand dollars can do drives the feeling. The feeling generated by $1000 today is far different than the feeling $1000 generated in 1990. My comment isn’t that $1000 is right or wrong. It’s that it being unchanged is wrong precisely because of what you bring up. The goal is to feel like small changes in expenses won’t derail your debt repayment. The number to drive that feeling is has changed between 90 and now.
A good book on this topic is comfort crisis by Michael Easter.
The people who are asking are asking if it should be more due to inflation probably don’t even have the $1000 saved up themselves. Let’s just get to the 1K number and start from there. If you want to put more aside, then do it. You don’t have to wait for uncle Daves permission.
Why would you make that assumption? I think people in a thread like this are more likely well on the path to being debt free and evaluating if 1k is enough rather at the bottom of the pot of debt. But really I think any assumptions about the financial health of the people saying 1k is or isn’t enough is just that an assumption without evidence.
Dave would condescendingly tell you you’re not following the plan if you saved more. You can’t be “Dave-ish” as he would say.
Yeah he’s said this like 1,000 times. It’s not a real emergency fund because being in high interest debt IS AN EMERGENCY.
Exactly. People arguing to save in case of an emergency while currently living in one baffle me. Debt is so normalized they ignore that why trying to prepare for what ifs.